Loan to company

This query is : Resolved

Guest

Guest (Querist)

31 August 2013 Dear sir

In regard to Public Co and Private ltd

1. when a share holder gives loan to the company

2. when wife of any share holder gives loan to the company

What are the consequences?

Ajay Mishra

Ajay Mishra (Expert)
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31 August 2013 Hi

Deposits in case of Private Limited Company

Private Company is prohibited to accept any invitation or acceptance of unsecured loans/deposits from the persons other than its members, directors or their relatives. Therefore a private company can accept deposits through private arrangement from its members, directors and their relatives.

Rule 2(b)(ix) exempt any unsecured loan money received from directors and shareholders from the definition of deposits. According to Rule 2(b)(ix), any amount received from members of a private company limited by guarantee are not exempt.

Rule 3 of Companies (Acceptance of Deposits) Rules, 1975 deal with the limit upto which a company can accept deposits/ loans. Private company exempted this limit.

For any invitation and acceptance of unsecured loan/deposits from relatives of directors and member, the company will have to file a statement in lieu of advertisement in accordance with the provisions of Rule 4A of the Companies (Acceptance of Deposits) Rules, 1975. The company will also have to file annual return of deposits in accordance with Rule 10.

Ajay Mishra

Ajay Mishra (Expert)
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31 August 2013
Consequences of acceptance of deposit by Private Limited Company

If a private company acceptance an amount, which may be classified as deposit under section 58A read with Companies (Acceptance of Deposits) Rules, 1975, it will cease its status of a private company and has to make all the compliances for such deposits as per the requirement of said rules, as well as to comply with all the provisions as may be applicable on public limited company such as section 58A, 58AA, 58AAA, 81, 256, 257, 198, 268, 269, Schedule XIII, 274(i)(g), 295, 297, 300, 301, 372A, etc

Guest

Guest (Querist)

31 August 2013 it means sir
a private company can accept loans from members and relatives of members

but what about Public limited company ?

Ajay Mishra

Ajay Mishra (Expert)
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31 August 2013 Yes.

In case of public company, it can take loan from directors and it will not be treated as deposit.

In case of loan taken from members it will be treated as deposit.

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